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How can they justify it?


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Morning all,

I've been looking for BRR opportunities around my area and a bit further afield but what has struck me more than ever is that properties in need of a full renovation are only slightly less than done up properties. 

How do agents justify this? I guess if the market will take it then that's how, but why would anyone buy a property for only 10k less that needs a full refurb when one a few doors down is full done up? Am I missing something?

Here's an example if anyone is interested...https://www.rightmove.co.uk/property-for-sale/property-78305227.html

I just don't get how it can be that price.

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All sellers want the maximum they can get and renovation tends to add marketability more then capital value; it’s just a matter of talking to the agents and driving the price down where you can by negotiating especially if you aren’t in a chain  or are a cash buyer.

Jerome

Jerome@TaxAntics.co.uk

www.TaxAntics.co.uk
 

 

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Thanks for the reply. I'm curious about the comment on renovation being more about marketability than capital value. I thought the whole point of renovation was to add value. Am I wrong? What would you advise for adding the most capital value? 

We're not in a chain. We're looking for our 4th property at the moment but don't want to pay above and beyond what is reasonable.

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Being able to go up into loft space, adding extensions/conservatories adds capital value. A renovation doesn’t really add capital value - it makes the property more attractive to buyers and potential tenants so is therefore likely to get a better asking price or rent; the immediate affect is the same but in real terms the capital value isn’t there as all properties tire in time unless well maintained.

Think of decor as Primarni versus Armani Jeans - both do the same job and raw material costs could be more similar than you might think but the Armani ones will always fetch the most buck! Neither are a capital item though.

The bonus is that renovation costs are income tax deductible so you get immediate relief for your expense whereas capital expenditure can only be realised on disposal unless capital allowances apply which is generally rare for residential lettings. 

I’d be more concerned about the numbers stacking up and the property being in an area where good rent is achievable. I’d pay more for something that I knew I’d get a better yield on. Given the current environment and being a little cynical and predatory, it probably won’t be long before there’s deals to be had if you hang on.

Jerome

Jerome@TaxAntics.co.uk

www.TaxAntics.co.uk
 

 

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Good advice, thanks.

Yeah at the moment I'm running the numbers on quite a few properties and comparing them to sold in the same street/area with similar sized properties/bedrooms etc. 

I won't be jumping into one yet as I think the prices will come down in a few months. Getting our ducks in order and seeing what's out there and been sitting around for a while is the focus right now.

 

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